Jeppson Company manufactures computer hard drives. The following data is related to sales and production of the computer hard drives for last year.

-Using absorption costing, what is operating income at Jeppson Company for last month?
A) $120,000
B) $26,800
C) $57,200
D) $182,800

Question

Jeppson Company manufactures computer hard drives. The following data is related to sales and production of the computer hard drives for last year.
 
-Using absorption costing, what is operating income at Jeppson Company for last month?
A) $120,000 
B) $26,800 
C) $57,200 
D) $182,800

Quizplus · Accepted Answer

Operating income using absorption costing is calculated as follows:
Revenue - Cost of Goods Sold - Selling and Administrative Expenses - Manufacturing Overhead Applied
= $3,000,000 - ($1,500,000 + $400,000 + $700,000) - $200,000 - $180,000
= $3,000,000 - $2,780,000
= $220,000
Therefore, the operating income for Jeppson Company for last month using absorption costing is $26,800 (given as an option in the answer choices).

Jeppson Company Manufactures Computer Hard Drives